What to watch in April U.S. jobs report

Gain of 135,000 expected; another soft number would raise alarm

WASHINGTON (MarketWatch) — The economy seemed on the verge of ramping up job creation to the highest level since the recession until March’s disappointing employment report. The latest jobs numbers for April might help explain if the slower pace of hiring in March was a temporary dip or another sign of a softening economy.

The U.S. likely added a net 135,000 jobs in April, up from an initially reported 88,000 in March, according to economists polled by MarketWatch. And the odds of the March numbers be revised somewhat higher are pretty good.

Still, the U.S. needs to add more than 200,000 jobs a month — its average from November through February — to drive unemployment down to precession levels under 6%. The economy has to add more than 100,000 jobs a month just to keep up with the natural growth of the labor force.

- Jeffry Bartash

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Conflicting signals

Two closely followed reports this week indicated that companies were slow to hire again in April. Payroll processor ADP recorded the smallest increase in new private-sector jobs in seven months, while a manufacturing employment index fell to the lowest level since November.

On the other hand, weekly jobless claims stooped to the lowest level in more than five years, but that report is a better indicator of layoffs than hiring. Companies may not be firing many people anymore, but they also are not rushing out to pad their payrolls.

Be careful of reading too much into these reports, however. Sometimes they are sharply at odds with the government’s monthly employment tally.

Standing in line

The U.S. unemployment rate has drifted lower since last summer and it touched a five-year low of 7.6% in March. Sounds good, but the rate has fallen in no small part because many people have given up looking for work.

Some decline in the so-called participation rate should be expected because the first of the Baby Boomers hit retirement age in 2011. Yet many people have also become too discouraged by the lack of available jobs. The broader U6 unemployment rate, which includes anyone who’s looking a full-time job but can’t find one, is much higher at 13.8%.

Watch the participation rate, which stood at a 34-year low of 63.3% in March. It’s a good thing if participation rises, even if the jobless rate moves higher as a result. It would be a negative sign if it fell again.

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Festering sequester

The effect of billions of dollars in government spending cuts under a law known as the sequester are expected to show up in April. Some federal agencies are leaving open positions unfilled or are relying less on independent contractors, particularly in areas such as defense. That could lead to an even sharper decline in the number of government workers, whose ranks have thinned over the past few years, mainly at the state and local level.

“The impact from the spending cuts should hit this employment report,” said economist Sam Bullard of Wells Fargo.

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Temporary condition

Pay attention to temporary hiring in April. More than 20,000 temps were hired in both February and March, but any erosion in that category would suggest a connection to the sequester. Federal agencies and companies that do lots of business with government may have scaled back hiring plans and shifted more work usually handled by temps to full-time employees.

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Not so heavy demand

Hiring intentions in the manufacturing sector weakened considerably in April, according to a key industry survey. Manufacturers reduced jobs in March for the first time in five months and another decline would be an ominous sign. A soft global economy has hurt U.S. exports and there’s little sign the rest of the world is about to start growing a lot faster.

The good news is U.S. manufacturers continue to expand and improve the productivity of their existing workforces. The implication is that any job cuts would likely to be small and transitory barring an economic meltdown.

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Health-care oasis

One wellspring of hiring that shows no sign of drying up is health care. The industry has added more than 700,000 jobs since the recession ended and the rollout of President Obama’s health-care law is likely to keep doctors and hospital administrators busy for years to come.

The surge in hiring in health care is nothing new, however. The industry has increase jobs in every month going back to 1990, the earliest year for which the government has records. Hiring continued through the Great Recession and the industry has added an average of more than 20,000 jobs a month over the past year.

Only a depression or sharp decline in the number of retirees, it seems, would cause the industry to shed jobs.

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Health-care oasis

One wellspring of hiring that shows no sign of drying up is health care. The industry has added more than 700,000 jobs since the recession ended and the rollout of President Obama’s health-care law is likely to keep doctors and hospital administrators busy for years to come.

The surge in hiring in health care is nothing new, however. The industry has increase jobs in every month going back to 1990, the earliest year for which the government has records. Hiring continued through the Great Recession and the industry has added an average of more than 20,000 jobs a month over the past year.

Only a depression or sharp decline in the number of retirees, it seems, would cause the industry to shed jobs.

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